Akobo Minerals

Regulatory Filings • Jan 28, 2022

A new golden age: inside Ethiopian mining

A new golden age: inside Ethiopian mining

Mine Magazine published an excellent feature article concerning gold mining in

Ethiopia - along with input from our CEO Jørgen Evjen.

Mine Magazine has published an excellent feature article concerning gold mining

in Ethiopia - along with input from our CEO Jørgen Evjen.

Follow this link to read the full article in Mine

Magazine (https://mine.nridigital.com/mine_feb22/ethiopia_mining_golden_age). We

have also included a text version of the article below.

[image]

For more news about the comany, please visit our website

www.akobominerals.com (https://akobominerals.com/news-media/)

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Driven by gold and supported by Canada, Ethiopian mining is a sector full of

potential for prospective investors. JP Casey asks how governments and companies

can help realise this potential, to deliver a beneficial mining sector for all.

With considerable gold reserves, and a rapidly-developing governance structure

in place, Ethiopia could be one of the most attractive investment destinations

for the global mining industry, especially for foreign firms looking for a stake

in the gold sector. According to the Extractive Industries Transparency

Initiative (EITI), Ethiopia boasts around 200 tons of gold, and with a further

366 million tonnes of coal and 70 million tonnes of iron, there is every reason

to be optimistic about the country's mineral future.

This is not to say, of course, that Ethiopian mining is not already a productive

enterprise. According to the latest EITI report on Ethiopian mining, between

2018 and 2019 gold production hit 3.23 tonnes, generating a value of around

ETB6.3bn ($126.3m), and operating as the driving force behind a mining industry

whose products were valued at close to $150m by the end of the period.

Yet that same EITI report noted that gold mining accounted for 93% of the value

generated by Ethiopian mining, highlighting a dramatically imbalanced sector

heavily reliant on a single commodity. Alongside challenges often seen around

the world, including the role of artisanal mining and the awkward balance

between foreign investment and local empowerment, there is no shortage of

challenges ahead of Ethiopia realising its lofty mining potential.

Untapped potential

The majority of Ethiopian mining potential is tied to its gold industry, with an

established history of production providing a stable base for new investments in

the commodity. The continued expansion and exploration of Akobo Minerals, a

mining company headquartered in Sweden, is a testament to this potential, as it

looks to develop mining operations at the Segele and Joru gold deposits.

"Exploration drilling activity at Segele, which hit some bonanza grades in 2020,

has so far shown outstanding high-grade gold results, achieving an inferred

mineral resource of 78 kilotons at 20.9g/t gold, equal to 52.410 oz of gold,"

explains Akobo CEO Jørgen Evjen. "Further drilling has intersected excellent

mineralisation below this area, while we also expect more to be found when we

explore deeper still."

Evjen also notes that the two projects offer different types of benefits, with

the Segele deposit boasting a much higher grade of gold, while the total ore

reserves of the Joru deposit are believed to be larger, high-potential deposits

that can be approached in different manners.

"Following positive initial findings based on trenching and RC drilling results,

we have been concentrating our Joru efforts on the central - and, so far known,

highest - grade part of the mineralisation, with a program of core drilling,"

Evjen continues. "We hope to be able to establish a resource base of more than

one million ounces of gold in Joru."

We hope to be able to establish a resource base of more than one million ounces

of gold in Joru.

Deposits such as these are made even more attractive by the relatively

supportive nature of Ethiopian mining law. The royalty rate for various

commodities sits between 2% and 7%, with precious minerals such as gold at the

higher end of the spectrum, a balanced range that aims to both encourage new

mining investment, and provide a source of income for governments on both the

local and national scale.

Evjen notes that Akobo's success has come down to a combination of "hard work,

happenstance, and timing", but that a supportive regulatory framework has been

essential in realising this potential.

"In addition to seeing encouraging gold deposits in the area, the right

management and local personnel were available; a positive business environment

was being developed by the Ethiopian government; annually renewed licenses for

the area were forthcoming; and funding became available to quickly build on

initial work over the previous decade," he explains.

"Add in the desire by all parties to take a measured risk on building a

professional exploration operation and all the elements were in place to begin

extensive exploration work in 2010."

Delivering local benefits

Of course, this power dynamic, where a company based in a wealthy foreign

country invests in local mineral deposits, occurs frequently in the mining

industry, especially in regions such as Africa. Such a dynamic brings a range of

challenges for both company and community, and Evjen is keenly aware of the need

to deliver benefits for local workers, not just for his own company.

"As a Western company with operations in a developing country, we recognise the

responsibility we have as a good corporate citizen," he says. "That is why we

put corporate social responsibility (CSR) and environmental, social, and

governance (ESG) - incorporating our good business manners and actions - at the

heart of our business.

"For companies wishing to operate in Ethiopia, CSR and ESG should be guiding

principles and measures that both enhance the business and provide tangible

advantages to the societies in which we operate. The business benefits and the

substantial social differences we can make with such practices will be a

positive for both us and the local community."

These considerations are all the more important when taking into account

Ethiopia's already well-established artisanal mining sector. Mining is not a

concept that has been imported wholesale from overseas companies, with small

-scale operations existing beyond local and national regulation for some time.

Ensuring that artisanal miners can maintain a stake in their projects, while

being able to benefit from regulatory oversight and support, remains a priority

for stakeholders of all levels.

Speaking for ourselves, we have worked hard to establish strong relationships

with national and regional governments and use local workforce to leverage their

historic competence.

The importance of artisanal mining is reflected in the latest EIRI report, which

found that the volume of gold produced by small-scale operations jumped from

0.82 million grams between 2017 and 2018 to 3.18 million grams between 2018 and

This has increased the value of the artisanal mining sector by almost 10 times

over this period, and the National Bank of Ethiopia offers a 5% premium to small

-scale miners when selling gold to the bank, helping to further incentivise

artisanal mining.

"Speaking for ourselves, we have worked hard to establish strong relationships

with national and regional governments and use local workforce to leverage their

historic competence," Evjen explains, noting that small-scale miners do not pose

a direct challenge to companies such as his, but can benefit from a shared

investment in mining practice and process. "This has been fundamental to our

success since 2010 and the accelerated growth over the last two-to-three years.

"As well as building local knowledge and relationships, as long as foreign

companies recognise their responsibility to the country's nascent mining

industry, to improve and develop activities such as health and safety and

environmentalism, we believe the opportunities in the coming decade and beyond

are limitless. And we look forward to welcoming other operators to the country."

Challenges national and international

Yet obstacles remain for Ethiopian mining, on both small and large scales.

Perhaps the greatest challenge facing the sector is its over-reliance on the

gold industry, which has led to problems for the entire mining supply chain as

the value of gold exports has fallen in recent years.

The EITI reports that the percentage of Ethiopia's total export value accounted

for by gold has fallen dramatically from 7% between 2016 and 2017 to just 1%

between 2018 and 2019, and with no sign of interest waning in gold, actors

across the sector will need to find a way to ensure the profitability of mining.

This also creates an issue for employment, too, with 30.1% of the country's

miners employed in mining, by far the largest workforce by commodity, and second

only to cement manufacturing. Indeed, 34.9% of the country's miners work in all

non-gold commodities, creating a significantly imbalanced sector where there are

almost as many gold miners as any other kind of miner.

The EITI also encountered administrative sluggishness in their collection of

data, describing "considerable delays" and an absence of reported figures from

some of the miners active in the country.

While these concerns will not single-handedly make or break the country's mining

industry, improving the quality and speed of reporting and record-keeping will

be essential as Ethiopia looks to transition its mining industry away from a

myriad of small-scale gold-mining operations and towards a more robust sector

that can attract international investment.

The greatest challenge we face is to get the speed of development right.

Yet, as Evjen points out, making sweeping changes to Ethiopian mining, either on

the scale of individual projects or the sector as a whole, could ultimately do

more harm than good.

"The greatest challenge we face is to get the speed of development right," he

explains. "To begin with, we want to keep things small-scale, using our mining

revenues to develop resources, rather than overburden the business with large

amounts of debt to finance operations.

"Our latest move from exploration to mining has not been a great leap as we have

taken on the right personnel and equipment as it has been needed; plus the

excellent results from our exploration prove that mining will not be as great a

risk as might have been thought."

There is also a geopolitical tension in Ethiopian mining. The sector has

benefitted from Canada's Supporting Ministry of Mines in Ethiopia (SUMM)

project, a multi-year, $15m Canadian Government scheme to reform Ethiopian

mining to make it a more attractive investment destination.

Ethiopian mining - alongside a positive business environment, in general - are

making the country a great opportunity for overseas investment.

While the SUMM project has delivered tangible benefits, such as the discovery of

new mineral deposits and assisting in the creation of government policies,

Canada's investment in Ethiopia has caused it to look the other way as civil war

engulfs Ethiopia's Tigray region.

While this is not an indictment of Ethiopian mining in particular, the inaction

of the Canadian Government highlights the complexities that can arise when

multiple national governments converge to make laws covering a particular

mineral resource. As Ethiopia looks to develop its mining industry further, and

the sector grows to encompass more international firms, tensions such as these

will need to be resolved to avoid conflicts in the future, and realise the

potential that Evjen still considers significant.

"Ethiopian mining - alongside a positive business environment, in general - are

making the country a great opportunity for overseas investment," he says. "Large

-scale mining is a sector where the government has a stated desire to transform

the Ethiopian mining sector into a competitive, proactive, and attractive sector

for international investments."

/ Main image: Danakil, Ethiopia - March 15 2019: Early morning view of a camel

caravan in Hamed Ela, Afar tribe settlement in the Danakil depression,

Ethiopia. Credit: Matyas Rehak / Shutterstock.com

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For more information, please contact,

Jørgen Evjen

CEO Akobo Minerals AB and Etno Mining P.l.c

Mob NO: +47 92 80 40 14

Mob ET: +251 944 76 2428

email: jorgen@akobominerals.com

www.akobominerals.com

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Akobo Minerals, is a Norway-based gold exploration company, currently with

ongoing exploration and small-scale mine development in the Gambela region and

Dima Woreda, southwest Ethiopia. The operations were established in 2009 by

people with long experience from the public mining sector in Ethiopia and from

the Norwegian oil service industry. Akobo Minerals holds a mining licence and an

exploration license over key targets in the area. Economic mineralisation was

discovered and the company is engaged in mining studies to advance the project

to production, alongside exploration core drilling. Akobo Minerals is

transforming its organisation to support an increased pace of core drilling. At

both the key targets Segele and Joru the company has so far released

exceptionally high-grade gold results including the Segele deposit with an

Inferred Mineral Resource of 78ktons at 20.9g/t.?A scoping study for Segele

includes an up-front capital expenditure of USD $8m and all-in sustaining cost

of USD $243 per ounce of gold produced. Core-drilling and trenching at Joru have

intersected both high-grade gold zones and large wide zones near surface. The

company has an excellent partnership with national authorities and places ESG at

the heart of its activities - a ground-breaking community program is being

planned.